How to Make Online Returns Hurt a Little Less

Feel like online returns are affecting your small business’ bottom line? A retail expert shares her tips for assessing their impact and saving money.
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Having a flexible return policy will increase customer trust in your e-commerce business.z (Photo: goodluz/Shutterstock)

The rise of e-commerce has coincided with a new phenomenon: the serial returner. With limitless choices online and increased ease and speed of purchase, more consumers are buying items they’re unsure about with the knowledge that they can always return them.

The consequences for companies doing business online? It can feel like returns are affecting their bottom lines and cutting into profits, because they’re having to absorb shipping fees in two directions. Barclaycard found last year that six in 10 businesses have been negatively affected by online returns.

But small businesses engaging in e-commerce can take some steps to assess how much online returns are affecting them and try to reduce their burden.

Related: Top Six Reasons Why E-Commerce Stores Fail

Returns are part of doing business now

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“If you offer free shipping all the time, both ways, it definitely is a hit, so you have to think strategically about other ways to offset costs.” -Ani Collum
(Photo: Ani Collum)

The unfortunate reality for retailers, according to Ani Collum, a consultant and strategist with Boston-based firm Retail Concepts, is that returns aren’t going away anytime soon.

Studies backs this up, too. Researchers at the University of Texas, Dallas analyzed more than 20 studies and papers on returns in the retail industry as a whole and concluded that overall, lenient return policies that customers have come to expect correlated with increased returns, but also increased sales.

As part of a study by researchers at Washington and Lee University, two online retailers began offering free return shipping and found that customers increased their purchases over the next two years by between 58 percent and a whopping 357 percent.

In other words, returns feels like a catch-22 for retailers, but they’re not going away anytime soon.

“Shipping and returns are pretty much a cost of doing business,” Collum said. She adds that having a flexible return policy in-store and online can increase customer trust in your business, as well.

Because of this trend, Collum said it’s important to analyze how much of an effect online returns are having on your particular business. It may hurt every time you create a return shipping label (if you’re offering free or discounted returns) or take something back in store. But if you haven’t stepped back to look at what percentage of online sales are returned for your particular store, you’re not getting a complete picture.

“It’s common for retailers of all sizes to make rash decisions about their businesses that penalize 95 percent of customers for the 5 percent that are causing problems,” Collum said.
“Look at the data, not the anecdotal stuff, and really see how much this is an issue.”

Get your listings in order

Before changing your online return policy, Collum suggests taking an audit of your listings online to try reduce the number of returns you get in the first place.

Really make sure your item descriptions are accurate and your photography reflects what the item looks like (after all, color discrepancies are a major reason items are returned). Add as many product measurements as you can. Heights, widths, depths and weights are essential for non-clothing products, when applicable. The more details, the better.

Large clothing retailers have started to use software like True Fit to make it easier for customers to find their size online. For small businesses, specialized software might be out of the question, but if you sell clothing online in particular, you shouldn’t just include numerical sizes. Add measurements for each item, especially since clothing manufacturers set their own standards for what they define as a size 2. Customer reviews and videos can also be worthwhile tools that help customers decide whether to buy something.

While improving your shop pages is time-consuming, giving your customers more information empowers them to make better decisions.

“It’s going to help make your customers happier and feel better about the purchases they’re making,” she said.

Offer free shipping, but charge for returns

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(Photo: ByEmo/Shutterstock)

The rise of Amazon Prime and Zappos has meant that customers shopping on the web now expect free, fast shipping. According to Pitney Bowes, 80 percent of customers say free shipping is a major factor in deciding whether to buy. Because of their size though, big businesses can absorb shipping costs.

While Zappos offers free returns, Amazon Prime and many other retailers do not (in other words, people do not expect free returns for all online purchases…yet). Your return process should fit your business.

“If you offer free shipping all the time, both ways, it definitely is a hit,” Collum said. “So you have to think strategically about other ways to offset costs.”

One way to do this is by offering free shipping to entice this 80 percent of buyers, but charge for return shipping, Collum said. Or better yet, tie free shipping to a minimum purchase threshold (i.e. spend $25 and get free shipping). Even if the customer returns one item from that order, you’ve still made a sale from the other items.

It also must be noted that if you mess an order up or an item is defective and damaged, Collum said it is essential that your business take the item back and cover the shipping as a gesture of goodwill to avoid tarnishing your brand’s reputation.

Cap your return date

Another strategy to make online returns a little more bearable is to add a time limit to your policy. 30 days is reasonable and 14 days is unreasonable, according to Collum.

While Collum does not advocate implementing an “everything is final sale” policy (or only giving store credit for returns) because it will discourage people from buying, it is common practice to make some products final sale. This includes end-of-season and holiday merchandise, as well as made-to-order goods. You can make these sale with steep discounts. As with any return policy, make sure to communicate that something is final sale to your customers.

Try other creative return practices

Collum also advises small businesses to explore adding a loyalty program that rewards frequent online shoppers with free shipping and returns. This could take many forms. You might offer free shipping and returns to your top spenders or to anyone who signs up for your mailing list.

If a lot of your online customers are from your area, take a page from major retailers’ playbooks and offer free returns in-store, then charge for returns by mail.

Finally, Collum suggests considering free shipping and free returns to people who send promotional codes and links to friends and family to spread the word about your business.

Leniency is key

Though you’ll always have customers who abuse your return policy, Collum said to compete online, even small businesses should be as generous as possible with returns.

She encourages businesses to look at returns as a way for customers to engage with your business a second time. If you make online returns easy and are gracious about accepting them, you’ll boost the perception of your brand and potentially create loyal brand ambassadors who will shop with you for years to come.

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